tv First Business FOX July 29, 2010 4:30am-5:00am EDT
growth numbers this week. will they disappoint the markets? plus, what women want. a new study reveals that's what major corporations are scrambling to find out. and the retailers poised to profit from back-to-school shopping. these stories and more on today's first business. you're watching first business: financial news, analysis and today's investment ideas. good morning everyone and thanks for joining us. it's thursday, july 29, 2010. and it looks like disappointing economic data is really overpowering the positive earnings news that we've been getting over the past couple weeks. and that is what is perhaps causing the stock market rally to lose a little bit of steam, angie. absolutely. and of course it's no comparison to the oil spill in the gulf, but 800,000 gal. of oil in the kalamazoo river making its way to lake michigan. that's a big story today as well. and that's something we're definitely watching, angie. also a state budget crises back in the news. california governor declares a state of emergency for that
state. he's directing workers to take three furlough days per month until a new budget is in place for california. and that state may have to issue ious starting in august. here's what governors schwarzenegger had to say: so certainly things are going to be getting a lot worse for california here in the next few months. well it's kind of a quiet market these days. let's check up on the trading floor there. ron pankau, independent trader there at the cme group. and jobless claims out on thursday, are you bracing for those? yes, and the jobless number we're paying quite a lot of attention to. especially when we're approaching the unemployment number coming up shortly and another week. but you know, i expect that it might take some of the steam out of the rally
in the stock market and i'm looking for a neutral number. the jobless claims, every last few weeks we've anticipated a very bad number. and some of them surprisingly aren't as bad as we thought. so, we've had a little bit of a runup in stock market and it was due to take some steam off like it did yesterday. but actually, expected to continue in a trading range. and the jobless claims, i'm hoping is a neutral number. ok, so you are thinking trading range, give me some levels on the dow or s&p. yeah, well i've watched the s&p mostly. the dow, for most of us down here the dow's 30 stocks, we like to watch the larger number. 1950 seems to be a support level, i've got 11250 as kind of resistance up at the top. and i think that we're going to chop around with in those two ranges. we've had a nice run up for a few weeks and i expect we pulled down a little bit yesterday and i expect you're gonna be in a trading range probably in a seven point trading range probably, up or down for the
next day or two. ok, so lots of choppy action ahead. thanks very much ron pankau, independent trader there at the cme group. the spending power of women is on the rise. which is why major corporations and marketing groups want to know 'what women want'. a recent study by yahoo! reveals some interesting answers. it might surprise you, but it's women who spend the most time online. "men check sports, do email, social network. women are online doing that and more." a new study conducted by yahoo! called connect-o-nomics is tipping off companys that want to market to women on how to better connect. "more and more marketers are looking to women because they control or influence the spending power. and so as more women come online, how you market to women and connect to women has become challenging." challenging because of the wide
variety of channels on the internet. add to that women are online at home, at work and on mobile devices. as a search engine segment, yahoo claims to be able determine interests of the female mind. "we can see where you go on our properties, how many women were looking at the news on obama or tiger woods. so if you are logged in, we can understand that information." where to find ladies online is just one step for major corporations looking for purse strings. "it translates into money. no company has just one target. so understanding women at a deeper level and their needs, that helps you make more money." sara lee, proctor and gamble, and walmart are a few of the companys benefiting from yahoo's research. and it turns out whether it's a working mom or a single businesswomen,there is a common denominator among women.
"what we found, women have something at the core. they care about each other, they care about relationships, they care about improving themselves. and a word of warning to advertisers, if she's on facebook, twitter or sending out emails to loved ones, don't bother with pop up ads. "at this moment when it's overt social networking, women don't want to be bothered. but if you are on a food site and there's a food ad, it's perfectly ok." timing is everything. yahoo! is also expected to reveal findings on men and young people. cash-out refinancings are dwindling fast. today, an increasing number of homeowners are forced to cash- in when they refinance a home, a dramatic turnaround from just 3 years ago. about 1 in 5 homeowners who refinanced their mortgage had to pay additional money at the closing table, according to freddie mac. that number ties for the third highest cash-in share since 1985. meanwhile, about 27% of borrowers continue to cash out
at refinancing, borrowing at least an additional 5% above the mortgage principal. that trend is at the lowest level since 1985. freddie mac says the main causes of lower cash out refis were dropping home prices and tighter lending standards. a federal judge roadblocked two major parts of arizona's controversial new immigration law. arizona police will not be able to determine the status of people they suspect of being in the country illegally, nor can they charge people of a new crime for not possessing immigration papers. according to the judge, these two parts of the law were unconstitutional attempts by arizona to regulate immigration. the state is expected to immediately appeal the court's decision. the law, which has triggered protests across the country goes into effect today. however, law officials say they don't expect much to change since they already have to check
the immigration status of people booked into jail or anyone lacking a valid u.s. id. under the new law, the immigration status of anyone who is arrested must be determined before they are released. what the back to school season means for retailers and investors. but first, tim mulholland of china america tells us whether the stock market needs a dose of reality. that's coming up next.
and let's take another look at headlines this week with tim mulholland of china america capital. tim, let's talk gdp growth. on friday, we're expecting a second quarter forecast of 2 1/2 for an annual growth rate. and depending on if we hit or miss that number, how do you see that impacting the markets? well i think what's gonna happen is these estimates and numbers have been coming out lower, then we were revised lower for quarter 1 gdp. the same thing will probably happen for quarter 2. but going forward what we will be looking at is the employment picture of the u.s.. the fact that inventories have been restocked and there's a debate right now whether these inventories now are going to be able to do anything more in the second half. so the second half of the year looks like people are be revising downwards and resting there as well. so i think it will reinforce the notion that growth is going to be a little slower than we previously
thought. and what are you anticipating for market reaction on friday? i think the market right now looks to be very stretched. you've had a 10% rally almost off the low in not even a month's time. so i think we're a little stretched and may be at the end of the month closing books rather than moving higher as we typically think. i think it could be a little profit-taking, especially coming into the employment report next week. ok, let's move on out. talking about no- confidence on main street at all. we get consumer sentiment numbers out on friday as well. and recent data shows that confidence levels are at the same level as a year ago. and during that time, the s&p 500 over the past one year is up about 15% since last july. so, why is there a continued disconnect between main street and wall street? well, i think you hit it right on the head. so wall street likes it, main street still has the unemployment rate and people are out of work for longer than they've ever been before. and you know the housing overhang right now, there's no relief. so i think in the real economy right now there's still some pain. and most expressed by
joblessness and i think that's giving pause. you might see a little uptick because the market tends to sometimes go with the stock market, at least initially the surprise might be. nevertheless, i think its still mired in a depressed mode right now, so i wouldn't look anything great for confidence until the job picture improves. all right, well with the stock prices trading at current levels, do you think the stock market needs a dose of reality? well i think right now it's basically hovering just around unchanged on the year. so i think its in a wait-and-see mode. there's one camp that believes earnings will be $97 for the s&p 500. in which case, markets trading at a cheap multiple. and the other camp thinks growth is going to be slow and expectations for innings aren't going to be that way. so i think it's in a wait and see right now, hovering unchanged for the year. but i still think risks are to the downside. ok, let's move on to metal prices. since april, the nickel e t f is down 26%. copper down 11%, aluminum down 17%. what are these telling us
about worldwide growth prospects? well, i think on the e t f side is probably telling you there's a little structural issue with e t f in the contango, argument with a row. but i think in general what that would tell you about the world economy is that inventory building has been done and we need to have these inventories taken or depleted drawn down to get another surge in the cycle of commodity prices. so i think it's hinting towards a pausing growth at a minimum, and perhaps with this acceleration of growth which is a possibility. and what about the impact from china as far as china's demand for these metals? china's demand is interesting because the demand for china " maybe at some bombs, but of all its trend is going to be hired. but one thing to remember with china is chinese produces management inventory extremely well. so i think from the time that standpoint, it's still gonna be the world's savior or commodities they did. but i think you need to be careful when you look at these e
tf's and you need to be too careful about judging every up and down because there's a lot trading going on in these commodities. ok, my last question, where is the euro mess tim? it looks like europe's problems are in the rearview mirror, at least for now. is there fiscal crisis not as bad as we thought? you know, we go through this. i think every so often until it's been a little hum right now. so, i think the european issue is far from being over and it should resurface again sometime this fall. at least that's my thinking because i think the fiscal problems are still there and the debt rollover problems are still there. so its gonna merit watching, but for now there's a calm and so while there's calm, i guess anybody's ideas is as good as the next. but i think you have to be very careful corn for because those problems are anywhere but behind them. ok, so even though the euro zone banks are rallying this week, you think they are still a short? i think in that case i would be a better seller than a buyer for sure. but you know remember, when things got oversold that
the rubber band affected and they snapback pretty heavily. but i think rather than chase the upside, look for a place to sell. ok, thanks very much. tim mulholland of china america capital. gm releases the much anticipated chevy volt. how the car stacks up against other electric- powered vehicles. you can find that story on our website, firstbusinessnews.com. plus, what parents are expected to spend this back-to-school shopping season. and daily market updates from the pros. it's all at firstbusinessnews.com. and straight ahead on the show... which retailers are best positioned to profit as students head back to school? find out after the break.
retailers are expected to get a boost from back to school sales. well, get out your number 2 pencils because this morning we are focusing on a couple of stocks from the retail sector. morniingstar analyst rj hottovy joins me now on set to take a look at a couple of big names. great have you on the show, thanks for coming in. so what do you think about back-to- school sales overall? do you think a lot of retail stocks are going to see some up moves? i think back to school will still be a boost for most retailers this year. but i think the one word that sticks out for this season is promotional. i think we have rallied off the low points of the recession in terms of the consumer mind-set, at the
same time consumers still need a catalyst to shop. it becomes more event driven is the phrase we are using in terms of shopping patterns right now. so what we have seen as a result is retailers starting the back- to-school season earlier than we've ever seen it. they had fires out as early as june this year. and it's only got more pronounced as we've moved through july. and the kids were barely out of class, isn't that crazy? yeah, i don't think it's summer anymore. i feel so sorry for them. let's take a couple looks at names like sears holdings, which they have kmart now as well as sears. so how do you think the stock is likely to perform? i think sales will hold up pretty well for the company. i think we will continue to see single digit growth out of the sales from that company. i think the stock right now actually looks quite cheap. our fair value estimate for the stock is 105, so the stock is trading at a pretty good discount to our fair value. again, i wouldn't expect huge gains from the company, but i do think we see
some modest sales improvements. and back-to-school sales should be fine. one risk though is with these heavy promotions that it may chip away a little bit at the earnings number for the company. really? that's interesting. i also thought was interesting that kmart has a $150 tablet out to compete with out. and also they're doing it back to school own wish list for students. i thought that was pretty smart to. yes, consumer electronics is definitely one category that i think will be big for back-to-school. students dependence on consumer electronics is obviously accelerated over the past couple years. its become almost a necessity product, as where once it used to be a luxury product. so it's not surprising to see kmart introduce such a product and the wish list i think it plays into that too. again, it's a way to get people focused on the big event, which is back to school. so any way to bring awareness to that season is certainly a strategy most retailers are using right now. now target is always a fan favorite, but how does target look like it's going to hold up
against wal-mart which is so might you? it's tough to compete on a price basis with wal-mart, but then again target does a little bit different approach in terms of the bring different products and have different brands and have collaborations with celebrities and what not, in terms of the fashion. they have a slightly different consumer electronics mix than wal-mart does. but again, it's very tough to compete with wal- mart on a price basis. generally speaking, i think target sales numbers will continue to hold up fairly well. again, but the risk is if they are to promotional may row the bottom line a little bit. something else i notice this year, office supply stores are going crazy with ads. what's that all about? really they've been one of the categories hardest hit by the economic downturn. office supplies to be driven by small business and consumer demand. and there just hasn't been a lot of demand, so sales and earnings have been hurting quite a bit for those companies. only recently did they start to come back. but again, they see more competition from nontraditional participants in this space. you
know, wal-mart, target, sears, kmart have all got more aggressive in this space. and this was a space that office product retailers use the phone. they're feeling the heat. and they feel like to have to be out there advertising quite a bit earlier than they ever have. are you a parent? no i am not. all right, me neither, so we save some money there. thanks a lot, but good luck to all those kids going back to school. and thanks so much for joining us rj hottovy, he's with morningstar. an analyst coming in today. we appreciate your time. when we come back, dan deming joins us. he sees something ominous in the charts, don't miss that. we'll be right back.
d01 here to talk about something he calls the death cross is dan deming of stutland equities. i'm not sure if i'm glad to see you today or not. what is going on with this death cross in the markets? it's a technical term, right? it is a technical term. i did not come up with the term, it's something that i've been made aware of the last month or two. a lot of technicians, especially technicians that follow the moving averages have been keeping a key eye on this. we saw this pattern back in 2001 in the tech sector when the tech sector rolled over. and so it kind of equates to today's market place. what that means angie, is the 50 day moving average crosses over and below the 200 day moving average. when ever you see that type of pattern, the technicians have classified it as a death cross. because most times, the high percentage of times the market is lower six months after that type of crowd takes place. and you say you're seeing that death cross and other areas as well? well, the s&p 500 right now, the dow, the nasdaq. now in
certain sectors within some of these markets we have not seen it officially happen. the russell is very close to crossing over, if you look at some of the e t f's like the s m h, which has been showing pretty good strength. it has not yet crossed, but still you can see there are across-the-board momentum of the 50 day moving average. the shorter-term momentum average is still much greater than the longer term up momentum. all right, dan deming of stutland equities with a very ominous chart talk today. thanks so much for coming in, we hope to have you back soon. that's it for today's show. remember viewer mail is coming up on friday morning, so get your calls and emails in early today. contact us at (312)660- 8397 or firstname.lastname@example.org. have a great day, we'll see you tomorrow.
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